All Forum Posts by: Keith Bloemendaal

@Joe Villeneuve This seems a little counter productive for someone like me. I could possibly start in year one with 20% down, or I could wait 3-5yrs while properties are appreciating and I could be building equity? 

Sorry, I am just a fan of using other peoples money wherever possible. 

Often I have seen advice given to always reinvest off the properties you are acquiring, my simple question would be (and there may not be an easy answer) would you take cash flow and pay down mortgage(s) so you could leverage that equity later for another deal, or save cash for the next deal?

I am starting out as a new home builder, and want to take anything over what I need to live on to build up a portfolio of buy and hold over the next 10-15yrs. 

I am no accountant, nor a lawyer. But let me speak from my experience in managing a company that had close to a dozen LLC's. Banks hate it. It's confusing.

When I recently started my new business, my banker flat out told me, "don't have too many LLC's. It's too confusing for bankers."

Essentially, the bank wants to know your solvency is what I got from it. Our companies were made up of an S Corp, with multiple LLC's under it and 2 partners owning the S Corp. It got to be a huge mess on paper to work with lenders.

So, I'd follow up with your banker before deciding to put every property in an LLC, just my $.02. If they are good with it, then go for it. Regardless of what a tax attorney or an accountant tells you, if the bank doesn't like it, it could hurt future lending capabilities. 

Last note, the company I was managing had over $16M in assets and built $10M per year in new homes. It could be different on smaller scale, which I am just starting out on my own doing. So, please, take my comments for what they are worth :-)

Partnership/Investor 

As I already stated, I had been shopping my new builds around for a few months and finally landed an investor/partner. Having been a project manager for a decent sized builder ($10M per year), I understood financing for new homes, and that it isn't always easy to come by. You can forget about and of the national chain banks. We worked mostly with credit unions,community banks, and private money. 

Being that I was pretty much broke, my credit wasn't all that good (low 600's), which is another story from rebounding after losing my plumbing business when the market crashed, I knew I needed a private investor to fund my projects. 

I had offers to partner and take 70% of my building company, no thanks. The agreement and partner I finally got agreed we would start a completely separate LLC and be partners. That company would be the landholder and investor. I own 50% of it, so does he.

We had some pretty simple terms to discuss, and we agreed completely on all of them, so that was a good start. One of them, and maybe the most important one, was that if one of us wanted out, that's it.... we would finish whatever projects we had started, sell off all property and dissolve the partnership. Essentially, partnerships agreements typically have a clause that says majority rules. Since it was just 2 of us, one person creates that majority, and we agree on that. 

Another term we completely agreed upon, he would handle the financials, I would build homes. My partner just happens to be a savvy investor and a conservative financial pro. I am completely good with that as well!

A new relationship was born. LLC is set up, bank accounts are being set up, and I hope to put my lots under contract next week.

Picking up my little girl tomorrow and have her the rest of the week for Thanksgiving, much to be thankful for. Everyone have a great Thanksgiving. 

@Jon Elson I would definitely get another quote. What is the 50% down for? Again I build new homes, not rehab, but I can't imagine why a contractor needs 50% up front, I would question that for sure!

@Kenneth Bell Thanks so much for posting this thread and the one about your crowdfunding experience as well. 

House is looking good, please keep us updated on activity and sales. 

I love the infill development idea, I have thought about that for the Wilmington area which is really starting to get some traction again. 

I really depends on the project, but I'd say 20-30% is not uncommon. I try to get 15% on new construction, ie: $50k on a $350k new build. Remodel is a different animal though. Have you had more than one bid? 

I believe in this state (NC) you have to hang your license under another broker for 2yrs before you can have your own brokerage. 

Great topic! As a newbie I thoroughly enjoyed reading all the comments. 

I am just starting out, part of my deal with my partner was that I would get a draw to live off of while we build the homes, it is modest, but enough to pay my mortgage, vehicle, etc.. and a little extra to start paying down credit card debt I racked up over the last few months. 

My goal is to take enough to live off of, comfortably, and at the end of the year assess what we have and start reinvesting once we have decent cash reserves. In my case, we need about $100k - $200k in cash reserves to have a working capital for construction. Bills always come in long before the draws come from the bank when you are building new homes. 

I do have a question to add to this conversation. Most of you said reinvest as much as possible. Does that mean pay down current properties as much as possible so you can pull equity to reinvest later? Or do you just save cash until you have enough for the next deal?

@Michael Jobe Thanks! I am new to this forum, but I love it! I was inspired to do this after reading a couple of other "diary" type posts, and am looking forward to sharing my story as I build this first home.